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Charles Schwab (SCHW) is trading around $93 Thursday morning — down about 4% even though it beat earnings this morning, posted record client assets, and grew revenue 17%. For investors with a 6-to-18-month horizon, this is exactly the kind of entry that works: a great quarter, a lousy tape reaction, and a washed-out chart.
The thesis: Schwab just delivered a record quarter — EPS beat, record $190.4 billion of net new client assets, a net interest margin that keeps expanding — yet the stock sits 19% below its 52-week high, below its 200-day moving average, and at a PEG ratio of 0.81. With the Fed likely raising rates again in December, Schwab’s interest-earning engine is pointed the right way.
Business snapshot
Charles Schwab is the largest retail-focused brokerage in the United States. Founded in 1971 on the discount-brokerage idea, it now serves 48.6 million client accounts holding a record $13.33 trillion in assets. Revenue comes from three engines: net interest revenue (the biggest line, from the spread it earns on client cash and loans), trading revenue, and asset management fees.
The moat is scale and switching cost. Schwab’s platform is the lowest-cost place in the industry to hold and trade assets, and once independent advisors and self-directed investors park their accounts there, they rarely leave. That scale shows up in the numbers: a 38.8% net margin and a 24.5% return on equity — figures most banks and brokerages never touch.
Financials: what the numbers say
Third-quarter results, reported this morning, were strong where it counts:
- Revenue: $7.17 billion, up 16.9% year over year — a quarterly record.
- Adjusted EPS: $1.69, beating the $1.66 consensus — the fourth straight quarterly beat.
- Core net new assets: a record $190.4 billion, up 38% from last year — a 5.8% annualized growth rate. Clients opened 1.2 million new accounts.
- Net interest margin: expanded to 3.04%, up from 2.88% a year earlier. Average interest-earning assets hit $451.5 billion, up 8%.
- Lending: bank loan balances jumped 35% year over year to $72.3 billion; margin loan balances climbed 14% quarter over quarter to $187.9 billion — clients are engaged, not retreating.
- Capital return: 4.7 million shares repurchased for $0.5 billion; the $0.32 quarterly dividend is easily covered with a payout ratio of just 23%.
Multi-quarter trend is clean: Q2 revenue grew 20.9% with a $1.62 EPS beat. The balance sheet engine — client cash, loans, and rising asset yields — is accelerating, not stalling.
Chart & technicals
SCHW peaked at $114.53 and has slid steadily since, closing Wednesday at $96.80. Thursday’s post-earnings drop has it near $93 — roughly 19% below the 52-week high and sitting on the $91–$95 zone that marked its lows in early October.
Support Resistance $91–$95 (today’s intraday low / recent swing lows) $98 (200-day MA at $98.25) $83.96 (52-week low) $105 (50-day MA at $105.22) $114.53 (52-week high) Momentum is washed out: RSI(14) sits in the low 30s, near oversold territory, and MACD is flattening near a potential bullish cross. Volume on Thursday’s sell-off ran at roughly 1.6x the 3-month average — capitulation-style prints at support zones are often what bottoms are made of. The stock has badly lagged the market: -11.6% over one month while the S&P gained 16% over the past year.
Valuation
This is the core of the buy case. At $93, Schwab trades at roughly 17x trailing earnings and about 14–15x consensus full-year EPS of $6.46. Its current P/E of ~19.9x is well below its 5-year median of 24.7x. The PEG ratio of 0.81 says you’re paying less than the earnings growth rate — a classic value-growth overlap.
Analysts agree the stock is mispriced: the consensus rating is Moderate Buy with an average target around $118, implying roughly 26% upside. Morgan Stanley raised its target to $141 (Overweight) just last week; Raymond James sits at $145. Even the bears have limited downside in their numbers — BofA’s $95 target is above the current quote.
Catalysts & what to watch
- December Fed decision: markets price an 88% chance of a hike. Higher short rates directly widen Schwab’s net interest margin on its $451.5 billion of interest-earning assets.
- Q4 earnings (mid-January): the next checkpoint on net interest margin, sweep cash balances, and asset-management fee growth.
- Cash-sorting reversal: transactional sweep cash rose $7.1 billion quarter over quarter to $492.8 billion — the client cash drain that crushed the stock in 2023–24 has clearly reversed.
- Capital returns: with a 23% payout ratio and ongoing buybacks, any acceleration in the dividend is a quiet tailwind.
Risks
- Cash sorting returns. If the Fed cuts instead of hikes, clients shift cash from sweep accounts to money-market funds, compressing the net interest margin that drives most of Schwab’s profit. This is the #1 risk and the reason the stock is cheap.
- Net interest revenue missed estimates even with the EPS beat — deposit pricing and funding costs can bite when clients reallocate.
- Insider selling: roughly $51.5 million of insider sales over the last three months (GuruFocus). Executives selling into weakness is a yellow flag worth respecting.
- Market risk: $13.33 trillion in client assets means a broad equity selloff would shrink asset-management fees and client activity — Schwab is not immune to a down tape.
Bottom line
Schwab just posted a record quarter — 17% revenue growth, a fourth straight EPS beat, record asset inflows, and an expanding net interest margin — and the market sold it 4% anyway. At $93, you’re buying a 24%-ROE compounder at a PEG of 0.81, 19% below its highs, with a higher-for-longer rate regime as a tailwind. That’s the kind of setup that rewards patience over a 6-to-18-month horizon.
Would you buy SCHW here, or wait for a deeper test of the $91 zone? What would make you more confident — a December rate hike, or another quarter of record inflows? Share your take below.
Related reading: Bank of America (BAC) Stock Analysis · Morgan Stanley (MS) Stock Analysis
Sources: Zacks Q3 earnings report · Schwab Q3 2026 press release (Business Wire) · StockStory Q3 coverage · WSJ Stocks to Watch, Oct 15 · MarketBeat analyst forecasts
Auto-posted by the Bull Lounge research desk.
Not financial advice. Do your own research.
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